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Greek Prime Minister Calls Creditors' Demands 'Absurd'

ATHENS—Greek Prime Minister Alexis Tsipras on Friday said the country was close to a default-saving reform deal but called on EU-IMF creditors to withdraw "absurd" demands for further austerity cuts after ducking a loan repayment to the IMF.

"I believe we are now closer than ever to a deal," Tsipras said in a speech to parliament as he faced criticism from the opposition on the state of the negotiations.

But Tsipras insisted that any agreement had to include debt relief in order to be a "definitive" solution to the Greek crisis, and he rejected proposals made by the country's international creditors this week.

"It is clear that the Greek government cannot under any circumstances consent to absurd proposals," the PM said.

Athens had earlier ramped up pressure in the make-or-break negotiations after postponing a loan repayment due Friday, and securing time to reach a deal compatible with its anti-austerity program.

Tsipras, 40, is under pressure from hardliners in his party insisting on a firm rebuttal of austerity demands.

Athens had been scheduled to repay the International Monetary Fund 300 million euros ($340 million), but late Thursday it announced it would bundle all four IMF remittances totaling 1.6 billion euros due this month in a single June 30 payment.

Dodging the threat of an immediate default, Greece has bought more time to negotiate with its creditors—the European Union, IMF and European Central Bank—who are demanding tough reforms before releasing the final 7.2 billion euros in bailout funds.

But the move rattled investors, with the Athens Composite Index falling by more than five percent before closing 4.96 percent down Friday.

Many worry that a default would set off a chain of events that could lead to a messy Greek exit from the euro.

"Tsipras will need some concessions by creditors on key items to win over critics in his own party: either by dropping requirements to increase sales tax or by scrapping benefits for low pensions, together with some gesture in terms of debt relief," IHS Global Insight senior economist Diego Iscaro said in a note.

"If creditors do not concede on either of these, then default risks would increase rapidly," he said.

Tsipras's radical left government is seeking less harsh fiscal and reform requirements attached to loans from creditors, who in turn have expressed dissatisfaction with Greece's ability to fulfil its promises.

The lenders have been insistent on higher primary budget surplus targets than Athens would like, financed by increased rates of sales tax, cuts in civil servants' salaries and pensions.

Low targets for the primary surplus—the government budget surplus before payments on national debt—would free up more money for social spending, and the Tsipras government has been adamant there will be no further cuts to salaries and pensions.

Another demand for Greece to drop a special sales tax rate for its tourism-vital islands drew a dramatic retort from Tsipras' flamboyant coalition partner, nationalist leader Panos Kammenos.

"VAT on the islands will not change so long as I exist," Kammenos, who is defense minister, wrote in a tweet.

Though Tsipras spoke by phone again late Thursday with German Chancellor Angela Merkel and French President Francois Hollande, the EU said no date had been set for another round of negotiations after talks late Wednesday failed to produce a breakthrough.

Tsipras also phoned Russian President Vladimir Putin to discuss business and energy cooperation, a government source said.

Several European sources told AFP earlier that a new meeting is not expected to take place before Tuesday, after this weekend's Group of Seven summit.

'Domestic Political Message'

The crisis talks between Athens and its creditors will be a key focus during the Sunday and Monday meeting in Germany of G7 leaders pushing for a compromise accord.

But the Athens government, elected in late January on an anti-austerity platform, feels that it has already considerably softened its initial position.

"We are making concessions outside our agenda, painful concessions to get a debt solution that will change the course of the country," Tsipras' party secretary Tassos Koronakis told Parapolitika radio.

Delaying its IMF payments gave the cash-strapped country a bit of breather, and also delivered "a domestic political message" to the recession-weary Greek people, said Panagiotis Petrakis, an economist at the University of Athens.

Only Zambia has previously used the bundling payment option during its debt crisis in the mid-1980s.